Liquidity Management in Sovereign Wealth Funds

A sovereign wealth fund (SWF) is a state-owned investment fund that is typically established from national savings, often resulting from revenues generated from natural resource exports. These funds invest across various asset classes with the aim of achieving long-term growth and stability while managing risks associated with inflation, currency fluctuations, and market volatility.

In this context, consider the implications of liquidity management for a sovereign wealth fund. Due to the inherent volatility of the global markets, SWFs need to balance their investment strategies with the requirement for liquidity to meet potential government spending needs or economic downturns.

Given this background, which of the following statements regarding sovereign wealth funds and their liquidity management strategies is most accurate?